Basics of Futures and Options

Derivatives market can be used to enter into a contract where the settlement happens at a future date. Futures contract will create a deal between a buyer and seller where both the parties are obliged to buy and sell the specified contract rate. Where as in an Option contract , the buyer will get the right to buy/sell an option at the strike price based on whether it’s a call option or put option, with not obligation. But the seller of the contract will. bear the whole risk, where he will have the obligation to buy/sell at strike price, but has no rights. For which the seller will collect a premium from the buyer for taking the risk. As a trader, we can use these option and futures to create strategies where we can reduce the risk taken and maximise the returns